Improving Your Credit Report
Many people underestimate the effect of negative information on their credit report. Clearing negative information is worth your time and effort because it can save money in interest on loans and credit cards. Below are five ways in which to get bad debt information removed from your credit report.
Pay a Portion if they delete it from your credit report
Offer 25% of the total debt in satisfaction of the debt. Remember that most debt collection agencies pay the original creditor “pennies on the dollar” for the debts they collect, so collecting 25% of the total debt still gives the agency a huge profit. As with the second method below, anytime you pay any amount on the debt and it is considered to be paid in full, request that any information about the debt be removed from your credit report. If the collection agency is unable or unwilling to take this action, then ask for the contact information of the original creditor. Be sure to get confirmation from the collection agency or the original creditor, that a Universal Data Form has been submitted to the three major credit reporting agencies.
Settle the debt
This method is similar to paying for the delete, but involves more active negotiation. As a rule, only unsecured debts such as medical bills, school loans, and personal credit cards can be settled. Secured debts, such as car loans and mortgage notes, do not settle since a default on payments results in a seizure of the asset (which is the security). The best way to negotiate a settlement is to put all terms in writing, including that the debt will be removed from your credit report. If possible, make one lump sum rather than payments, since payments could arguably re-start the statute of limitations on the debt. Do not pay any fees, penalties, or interest on the debt, since these are illegal under the Fair Debt Collection Practices Act (FDCPA).
Under the FDCPA, a debt collection agency must provide proof upon request that the debt it is trying to collect is valid. Note that debt validation cannot be used with original creditors; the FDCPA does not apply to them.
Debt validation involves the collection agency providing at least one of the following items of proof upon request:
- Proof that it owns or has been assigned the debt.
- A copy of a statement from the original creditor.
- A copy of the original signed loan agreement or credit card application.
- A copy of the canceled check from you to the original creditor.
If the debt collection agency cannot validate the debt, it must cease collection activities. Many collection agencies are unable to validate debts, so this is a highly effective way of clearing your debt and your credit report. Note that a debt must be within its statute of limitations or it cannot be collected.
Dispute with the original creditor
If you believe that the debt information on your credit report is inaccurate, ask the creditor for an investigation pursuant to the Fair Credit Reporting Act. If the creditor cannot prove the accuracy of the debt history–e.g. late payments, skipped payments, etc–then the debt must be removed from your credit report.
Dispute with credit bureau
Similar to the dispute process above, if the credit bureau cannot verify the negative information on your credit report within the time allowed by law, then they must remove it.
If you have a dispute with a debt collection agency regarding the validity or amount of a debt being collected, fill out our FREE CASE EVALUATION FORM.
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(This article is for informational purposes only and should not be relied upon for legal advice. Your case should be reviewed by an attorney to determine the proper legal advice for your situation.)